Key points
- Korea's 30 million won ($21,100 USD) cash deposit rule for single-stock leverage and inverse funds started on July 31, moved up from August after the president asked for it sooner.
- Trading in the 16 funds fell to 2.9907 trillion won ($2.1 billion USD) on the first day, from 12.4485 trillion won ($8.74 billion USD) the day before. That is down 76%.
- Individual investors traded 929.9 billion won ($653 million USD) of them, down 83.1% in one session and the first day under 1 trillion won since these funds listed on May 27.
- The Kospi rose 17.91% that same day, its largest single-day rise on record. Less money moving through the funds did not mean a calmer market.
- One session is a small sample, and it was not a clean one. US markets had risen sharply overnight, so Seoul opened into a rally it did not create. The first real test is the week starting August 3.
On July 31, the first day Korea's new deposit rule applied, trading in the 16 single-stock leverage and inverse funds tied to Samsung Electronics and SK Hynix fell to 2.9907 trillion won ($2.1 billion USD). The day before it had been 12.4485 trillion won ($8.74 billion USD).
That's a drop of 76% in one session, and it's the clearest answer yet to a question people here have been asking for two months. These funds pay double whatever the two stocks do in a day, or double the opposite for anyone betting the stocks fall, and regulators decided they were making the whole market move harder than it should. The rule was meant to slow them down. On the first day it did.
What it didn't do is make Seoul any calmer. The Kospi rose 17.91% on July 31, the largest single-day rise in its history. Less money went through the funds and the market had its wildest session on record, both on the same day, which is why one trading day can't settle this.
What the rule actually asks for
Anyone buying these products now needs 30 million won ($21,100 USD) sitting in their account as cash, up from 10 million won ($7,000 USD). Shares and bonds used to count toward that at 70% of their market value. They don't count at all anymore. We wrote about the rule when it was announced and about the anger from retail investors that followed, so there's no need to go through all of it again.
The one thing worth repeating is the timing. The Financial Services Commission (금융위원회) had planned this for August. On July 24, it moved the start to July 31, after President Lee Jae-myung pressed at a cabinet meeting for a faster rollout. That's how the rule ended up landing on the same morning the market recorded its best day ever.
The first day, in numbers
Individual investors are the people the rule was written for, and they're where the drop shows up hardest. They traded 929.9 billion won ($653 million USD) of these funds on July 31, against 5.5039 trillion won ($3.87 billion USD) the day before. That's down 83.1%. Measured against the daily average since the funds listed on May 27, it's down 76.9%, and it's the first session under 1 trillion won these products have had in their short life.
The funds themselves tell the same story. KODEX SK Hynix Single-Stock Leverage, the largest of them by net assets, traded about a third of what it had the day before. SOL SK Hynix Futures Single-Stock Inverse 2X, which pays double the opposite of the stock, traded about a ninth.
None of that was because the funds stopped working. SK Hynix closed limit up at 29.95% that day, its first limit-up close in about 17 years, and the 2x funds tracking it returned 58% to 60%. Doubling 29.95% gives 59.9%, and these funds follow the futures rather than the Seoul close, so they land near the multiple instead of exactly on it. Samsung rose 26.81%, its best day on record. People simply couldn't get in. We covered who got locked out that morning in more detail on Friday.
What analysts in Seoul make of it
Kim Jae-seung, a researcher at Hyundai Motor Securities (현대차증권), thinks some of the drop was already under way before the rule arrived.
"Individual investors' net buying strength in single-stock leverage ETFs was already on a slowing trend as July began, and the share of leverage ETFs relative to domestic equity ETF assets is also normalizing," Kim said.
"There is a possibility that the effect of the tighter regulation on the market is limited, but the trading trend needs further confirmation," Kim added.
That matters for anyone reading the 76% as proof the rule worked. Some of it is the rule. Some of it is a crowd that was already thinning out.
Lee Jae-won, a researcher at Yuanta Securities (유안타증권), points at a different part of the rule. It's the part almost nobody has been discussing.
"The core of the stronger deposit requirement is not the 30 million won barrier to entry, it is the fall in the speed of money turnover from recognizing sale proceeds as cash only on T plus 2," Lee said.
Selling something used to hand you spendable cash right away. Now the money counts as cash two days after the sale, so the same 30 million won can't be run through trade after trade in one session. If Lee is right, that slows the machine down more than the entry price does.
Lee expects that to show up in the numbers, and then somewhere else entirely.
"A large drop in the number of trades and in turnover is expected, and if it comes with a fall in net assets as well, the concentration in Samsung Electronics and SK Hynix eases and it could work in favor of the Kosdaq," Lee continued.
Why one day doesn't settle it
There's a plainer reason trading fell, and it has nothing to do with regulation. Samsung and SK Hynix both rose sharply from the opening bell, and when a stock moves like that in one direction, buyers and sellers both step back. Someone in the financial investment industry made that exact point to Seoul Economic Daily (서울경제).
"There is also the side of it that Samsung Electronics and SK Hynix share prices rose sharply from early in the session, so buying and selling both fell," the person said, adding that more time is needed before anyone can judge what the policy is doing.
There's a bigger reason to hold any conclusion loosely. This is one trading day, and it wasn't a normal one. US markets had risen hard the night before, with the S&P 500 up 1.7% and the Nasdaq up 2.78% in its best session in weeks, so Seoul opened on Friday into a rally it hadn't created. A day that arrives already moving is a poor place to measure what a domestic deposit rule is doing to domestic trading.
Two other things are worth holding onto. Foreign and institutional investors aren't covered by the deposit rule at all, so the biggest participants in Seoul can still trade these products freely. And the money individual investors can no longer put into leverage funds hasn't left the country. It's sitting somewhere, which is why Lee's point about the Kosdaq is more than a footnote.
Regulators have already said more measures are coming. They're looking at cutting the 2x multiple itself, which would change what the funds do rather than who can buy them.
Monday starts the first full week under the rule. That is where anyone finds out whether Korea's stock market moves less than it did in July, on days Seoul has to make on its own.
Sources
- 서울경제, 레버리지 기본 예탁금 강화 첫 날…개인 투자자 거래대금 83% 감소, on the first-day trading figures for individual investors and the industry comment
- 뉴스핌, 레버리지 ETF 규제 첫날 거래 '급랭'…거래대금 3조원으로 급감, on the totals by fund and the Kim Jae-seung and Lee Jae-won remarks
- Our earlier coverage: the deposit rule when it was announced and the record rally on the morning it started
Won figures are converted at 1,424 won to the dollar, the July 31, 2026 rate. Analyst remarks are translated from Korean. This article is for information only and is not investment advice.
